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Add These 4 Retail Stocks to Cart as Sales Pop in January

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Well, you can’t overlook concerns related to sluggish business spending, outbreak of coronavirus in China and other geopolitical issues that are fueling apprehensions regarding slowdown in the economy. But for now, an uptick in January retail sales may help alleviate such fears to an extent. Notably, this was the fourth straight sales improvement and it highlights a healthy consumer spending environment.

Apparently, a strengthening labor market and rising disposable income have been fueling consumers’ spending activity. Per the Labor Department, the United States added 225,000 jobs in the month of January. Market pundits expect consumer spending — one of the pivotal factors driving the economy — to remain strong courtesy of upbeat sentiment. This is evident from consumer sentiment index that rose to 100.9 in February from 99.8 last month, according to the University of Michigan.

Retail Sales Rise

The Commerce Department stated that U.S. retail and food services sales in January advanced 0.3% to $529.8 billion. This follows a slightly downward revision in December’s reading that now shows a gain 0.2% instead of 0.3% earlier. According to the report, nine of 13 major categories showed sequential growth. Notably, retail sales improved 4.4% from January last year.

Analysts pointed that mild winter weather fuel sales at hardware and furniture stores as well as restaurants and bars but resulted in lower spending at clothing stores.

The report suggests that sales at motor vehicles and parts dealers rose 0.2%, while at building material dealers the metric increased 2.1%. Meanwhile, sales at food & beverage stores and furniture & home furnishing stores rose 0.2% and 0.6%, respectively. Sales at food services & drinking places jumped 1.2%.

Sales at general merchandise stores increased 0.5%, while the same at sporting goods, hobby, book & music stores were up 0.1%. Sales at non-store retailers not only jumped 0.3% but also climbed 8.4% from the prior-year period.

However, sales at health & personal care stores and clothing & clothing accessories stores fell 0.4% and 3.1%, respectively. Again, sales at both electronics & appliance stores and receipts at gasoline stations fell 0.5%, respectively. Sales at gas station sales fell on account of lower prices.

4 Prominent Picks

It goes without saying that the Retail & Wholesale sector’s prospects are closely tied to the purchasing power of consumers, and with U.S. retail sales showing momentum, the sector is likely to remain in the limelight. Retailers riding on the wave of favorable consumer environment and strategic endeavors have led the sector to advance 9.5% in the past three months. Consequently, picking up stocks from the space will be a lucrative move.

We have shortlisted stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. Also, the stocks have outperformed the sector.

We suggest investing in Performance Food Group Company PFGC, which has a long-term earnings growth rate of 12% and VGM Score of A. This marketer and distributor of food and food-related products in the United States has a trailing four-quarter positive earnings surprise of 19.4%, on average. Shares of this Zacks Rank #1 company have gained 15.7% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is The Habit Restaurants, Inc. HABT, which has a VGM Score of A. This fast-casual restaurant operator has registered positive earnings surprise in the trailing four quarters. Shares of this Zacks Rank #2 company have surged 27.4% in the past three months.

Investors can also count on Burlington Stores, Inc. BURL, which operates as a retailer of branded apparel products in the United States. This Zacks Rank #2 company has a long-term earnings growth rate of 15.1% and a VGM Score of B. The company has a trailing four-quarter positive earnings surprise of 7.6%, on average. The stock has advanced about 18% in the past three months.

Best Buy Co., Inc. (BBY - Free Report) , retailer of technology products, services, and solutions, is a solid bet. It has a Zacks Rank #2 and a VGM Score of B. The company has a long-term earnings growth rate of 8.7% and a trailing four-quarter positive earnings surprise of 9.9%, on average. The stock has risen roughly 16.7% in the past three months.

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